Chinese Stocks Rally; Markets Await US Inflation: Markets Wrap

(Bloomberg) — Stocks in China jumped after the release of details on stimulus measures as investors turned their focus to US inflation data, which will shape the Federal Reserve’s policy easing plan.

Most Read from Bloomberg

Asian equities rose across the board on Thursday, with a benchmark of mainland Chinese shares clawing back some of the previous day’s losses. European and US futures were marginally lower. Treasuries were steady, while oil gained as traders watched for an Israeli response to Iran’s missile attack. The Bloomberg Dollar Spot Index and the euro were little changed.

While the promise of new policy stimulus gave Chinese markets a shot in the arm in late September, concerns the deployed sum won’t be enough snapped a blistering rally in mainland shares on Wednesday. US inflation data later on Thursday will provide further detail as to the path of Fed policy, while investors in China will look to a press conference by the finance ministry on Saturday for clues on its fiscal stimulus.

“After a few days of heavy profit taking, we expect the offshore market to move on to the second phase of the rally, which features slower gains, higher volatility but with the basics – earnings and valuations – back in focus,” said Richard Tang, China Strategist and Head of Research Hong Kong at Julius Baer Group Ltd.

Louisa Fok, a China equity strategist at Bank of Singapore, said two trillion yuan ($283 billion) of stimulus is “now becoming the consensus,” with probably half of that going to local governments. If a majority of the remainder goes to consumption, it will be positive for markets, she said.

READ: Hedge Funds Sold Record Chinese Stocks on Tuesday, Goldman Says

Elsewhere, Taiwan Semiconductor Manufacturing Co. posted a better-than-expected 39% rise in quarterly revenue on Wednesday. Markets are closed in Taiwan on Thursday. Indian shares gained even as quantitative strategists at Bernstein cut their equities rating to underweight from neutral.

US consumer price data is expected to show inflation further moderating, supporting the Fed’s anticipated easing in the coming months. But in the wake of surprisingly strong job growth for September reported last Friday, the gradual slowdown in price pressures suggests policymakers will opt for a smaller interest-rate cut when they next meet month.

Fed Chair Jerome Powell has said projections issued by officials alongside their September rate decision point toward quarter-point rate cuts at the final two meetings of the year.

In France, Prime Minister Michel Barnier’s government will present budget details to his cabinet on Thursday evening in Paris. It’s expected to be an initial course of shock therapy to tackle swelling deficits, aiming to reassure skeptical bond investors and navigate forceful opposition in a fractured parliament.

In commodities, crude edged higher after a two-day decline, with Brent trading near $77 a barrel. The market remains on edge about Israel’s intentions to launch a retaliatory strike against Tehran, which has sparked fears about an all-out war. Iran has warned it’s ready to launch thousands of missiles if needed.

President Joe Biden has discouraged an attack on Iranian oil infrastructure, and spoke with Israeli Prime Minister Benjamin Netanyahu on Wednesday for the first time in over a month.

Key events this week:

US CPI, initial jobless claims, Thursday
Fed’s John Williams and Thomas Barkin speak, Thursday
JPMorgan, Wells Fargo kick off earnings season for the big Wall Street banks, Friday
US PPI, University of Michigan consumer sentiment, Friday
Fed’s Lorie Logan, Austan Goolsbee and Michelle Bowman speak, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 6:56 a.m. London time
Nikkei 225 futures (OSE) rose 0.3%
Japan’s Topix rose 0.2%
Hong Kong’s Hang Seng rose 3.4%
The Shanghai Composite rose 2.2%
Euro Stoxx 50 futures were little changed

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0940
The Japanese yen was little changed at 149.23 per dollar
The offshore yuan rose 0.2% to 7.0751 per dollar
The Australian dollar rose 0.2% to $0.6732
The British pound was unchanged at $1.3071

Cryptocurrencies

Bitcoin rose 0.8% to $60,870.27
Ether rose 2% to $2,400.82

Bonds

The yield on 10-year Treasuries was little changed at 4.07%
Japan’s 10-year yield advanced 2.5 basis points to 0.955%
Australia’s 10-year yield advanced three basis points to 4.22%

Commodities

West Texas Intermediate crude rose 0.8% to $73.80 a barrel
Spot gold rose 0.2% to $2,613.05 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Abhishek Vishnoi and Masaki Kondo.